What to Look for in a Financial Advisor (Checklist)

12.15.21 | Personal Finance

Finding the right financial advisor can be a challenging process. You want to work with someone who has the right credentials and relevant experience to help simplify your financial life and put you on a path to reach your goals.

Whether you have a referral from a friend or family member or are looking through online search results, we recommend looking at four main areas when considering a financial advisor.

1. Compensation Model

As we talked about in a previous post, there are two main compensation models for financial advisors.

Fee-only advisors are paid directly by the client, usually as a percentage of the assets under management. Compensation can also be a fixed, flat, or hourly rate. More importantly, fee-only advisors do not receive commissions on financial products they recommend to clients. This makes for a more transparent relationship and is less likely for your advisor to have a conflict of interest.

Fee-based advisors are paid by the client but can also receive commissions from products they sell. Earning a commission may be a conflict of interest as the advisor may be incentivized to steer you toward specific products or proprietary funds.

Something to keep in mind—the quality of service does not depend on your advisor’s compensation model. However, knowing the differences between the two models will help you be well-educated before seeking help from an advisor.

2. Fiduciary Standard

A fiduciary is a person or organization bound legally and ethically to act in their clients’ best interests. Registered investment advisors have a fiduciary responsibility to clients. Keep in mind that brokers may only be held to a suitability standard, which requires them to make recommendations that are suitable for you.

Before hiring an advisor, check their website or contact them to see if they are a fiduciary.

3. Designations/Affiliations

Most advisors will list credentials. Here’s a quick review of some common designations and affiliations you might encounter during your search.

Certified Financial Planner (CFP®) is one of the more rigorous qualifications and is considered the “gold standard” for financial planning. To earn this certification, advisors must pass a six-hour exam, have three years of relevant experience, and complete 30 hours of continuing education every reporting period. CFPs are also held to a fiduciary standard.

National Association of Personal Financial Advisors (NAPFA) is an association of advisors who adhere to the strictest fiduciary requirements and meet the most rigorous continuing education requirements in the industry. NAPFA-Registered Financial Advisors are highly competent and have met more than a de minimis certification standard, offer holistic services, and operate on an objective Fee-Only basis. Their only purpose is to look out for their clients’ overall financial well-being.

Accredited Investment Fiduciary (AIF®) is a certification that demonstrates an advisor responsible for managing or advising on investor assets understands the principles, standards, and process of fiduciary responsibility. Earning this certification includes meeting educational, competence, and ethical standards.

Chartered Financial Analyst (CFA) is a globally-recognized designation from the CFA Institute that certifies an analyst’s competence and integrity. Candidates must pass three levels of exams covering accounting, economics, ethics, and money management. CFAs often specialize in portfolio management and investing.

Chartered Retirement Planning Counselor (CRPC®) is a professional financial planning designation awarded by the College for Financial Planning. Individuals may earn the CRPC designation by completing a study program and passing a final multiple-choice examination. Every two years, CRPCs must complete 16 hours of continuing education.

Chartered Life Underwriter (CLU®) is a financial professional with extensive knowledge of life insurance. A CLU has obtained a level of life insurance expertise that exceeds basic insurance underwriting requirements.

4. Specific Services

Finally, a financial advisor should be able to help you reach your financial goals. Check to see if they offer the services you are looking for. Maybe you’d like to start a college fund for your children or grandchildren, or perhaps you want to take a more tax-sensitive approach to your retirement plan.

Try to find a list of services on an advisor’s website or contact them to ask what they offer.

What’s Next?

What do you do once you’ve found a potential advisor?

Go ahead and schedule an introductory meeting and come prepared with a list of questions. This is your chance to interview a potential advisor and see if they are a good fit for you and your financial goals.

  • Here are some questions you may want to ask:
  • How do you get paid (fee-only vs. fee-based)?
  • Are you a fiduciary?
  • What are your credentials?
  • Do you have relevant experience to help me achieve my financial goals?
  • How will we track progress toward my goals?
  • What’s your process? What can I expect over the next few months? Over the next year? Three years?

Don’t hesitate to ask specific questions about your goals or current financial situation. Don’t be nervous about asking questions. Finding the right advisor is about building a relationship based on trust and communication.

Plan for a More Confident Financial Future

Midwest Capital Advisors helps people simplify their financial lives and make the right decisions to meet their goals. We will work alongside you to assess your current financial state and listen to your goals for your family, your employees, or for your future. We will map out specific recommendations to help meet those goals, implement your plan, and monitor it. Learn more about our financial planning process, or let us know if you have questions about our services.


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